M&A Not a High Priority for Verizon in 2017

Verizon doesn't see the need to engage in “massive M&A” in 2017, President of Operations John Stratton said Thursday at a Wells Fargo investor conference in New York. He added that it's good to have the option to pursue mergers and acquisitions in case something comes up. Stratton also discussed the company's wireless business, its focus on fiber, its IoT business and its priorities for 2017, which include plugging cash into improving network infrastructure, he said: “Back to the fundamentals.”

Verizon's wireless business will improve in Q4, Stratton said. He said the company is focused on protecting its base. Stratton said that “postpaid phone churn has been below 0.90 percent for the past 6 consecutive quarters,” and that the company “has a high degree of confidence it can sustain those levels going forward,” Wells Fargo analyst Jennifer Fritzsche emailed investors. Stratton said that the company expects churn in tablets due to promotional tablet offers from two years ago. The wireless phone market in Q3 and the company's Q3 phone numbers were affected by the recent launch of the iPhone 7, and September being the two-year anniversary of the launch of the iPhone 6. That means many customers were up for renewal then, Stratton said. The company's new pricing and accompanying app have been very popular with its customers, he said. The app and pricing plan were created after “deep dialogue” with consumers, and have resulted in the fastest ever migration to new plans the company has seen, he said.

The carrier is looking to improve its bottom line by “improving the efficiency of distribution," Stratton said. Millennial customers increasingly look for online solutions to problems rather than turning to call centers or physical stores, Stratton said. In the next three or four years, that generation of customer “will have major buying power” in the U.S. market, Stratton said.

Though the first focus was on having the widest possible coverage area, the company is now focused on capacity, Stratton said. Though he declined to discuss efforts to acquire more spectrum, he said Verizon's fiber investments have become important to its other businesses. “With the pending acquisition of XO Communications, VZ has a fiber footprint in 45 of the top 50 cities,” Friztsche's email said. Verizon/XO is moving ahead in Pennsylvania as New York state and the FCC review it (see 1611100025). The company is expanding in Boston because its fiber presence plays nicely with efforts toward “densification” of its wireless offerings in urban locations, Stratton said.

Verizon's IoT business is on the rise and has shown steady growth, Stratton said. "The opportunity to stack services on top of the core network layer in these businesses can drive significantly higher margins and returns," Friztsche said.